Bank of England to publish stress test results on 28 November
The Bank of England has received initial stress testing submissions from the seven largest UK banks and confirmed it will be publish results on 28 November.
Seven banks, Barclays, HSBC, Lloyds Banking Group, Nationwide Building Society, Royal Bank of Scotland, Santander UK and Standard Chartered, will all be tested under two scenarios agreed by the Financial Policy Committee and Prudential Regulation Committee.
The 2017 stress test includes two stress scenarios that were set out in March this year, where alongside the annual cyclical scenario (ACS) the BoE will run an additional biennial exploratory scenario.
The ACS incorporates a severe and synchronised UK and global macroeconomic and financial market stress, as well as an independent stress of misconduct costs, though having set a new “anchor” on its severity, the BoE will only test areas more severely where it thinks risks have grown.
Differentiating its from last year's annual test, which measured for a potential cut in the bank rate to zero, the 2017 scenario incorporates a rise in the bank rate peaking at 4% plus a 27% fall in the pond to $0.85 and a sudden increase in the return investors demand for holding sterling assets, while the test will examine how lenders deal with a spike in UK unemployment to 9.5% and a 33% slump in house prices.
The exploratory scenario will consider how the UK banking system evolves in an environment of weak global growth, persistently low interest rates, stagnant world trade and cross-border banking activity, increased competitive pressure on large banks from smaller banks and non-banks, and a continuation of costs related to misconduct. The test has a seven-year horizon to capture these long-term trends.
"Neither the stress applied under the ACS nor BES is a forecast", the Bank stressed.
The full stress test results will be published alongside the Financial Stability Report at 0700 GMT on 28 November, with no results for individual firms published prior to this date.